Offshore Trusts Report: Malta

Legal Framework and Formation Rules and Fees

Trusts in Malta were based on the Offshore Trusts
Act 1988 which was largely based on Jersey trust law, itself a common
law implant stemming from English trust law. Trusts under this Act
had to have non-resident settlor and beneficiaries, and trust assets
could not include Maltese real estate. This legislation was amended
by The Trusts and Trustees Act 2004, which became effective in January
2005.

Maltese trust law establishes the confidentiality of trust documents
and dealings and the actions of the trustee. The Professional
Secrecy Act 1994 imposes strict confidentiality rules on all professionals,
officials and other individuals who receive privileged information
in the course of their duties; the sanctions are heavy fines and
imprisonment.

The Malta Financial Services Authority (MFSA) is responsible
for the authorisation and supervision of trustees and the regulation
of trusts. Its regulatory responsibilities also include the licencing
and supervision of insurance companies, collective investment
schemes and providers of investment services, banking and financial
institutions.

Some of the main features of Maltese trust law are
as follows:

The perpetuity period for Maltese trusts is 100 years;

The settlor may be a beneficiary under the trust;

Powers of the trustee are wide and flexible;

The office of Protector is allowed for;

Forced heirship provisions are excluded.

The Recognition of Trusts Act 1994 gave effect to
the Hague Convention, and resulted in a division of trusts into:

Maltese trusts, where the proper law of the trust is Maltese,
and the governing legislation is the 1988 Act (now called
the Trusts Act 1988); and

Foreign trusts, governed by whatever law the settlor has
nominated.

All trusts, including foreign ones, must register
with the MFSA, for which a fee is imposed on registration and annually
thereafter. Foreign trusts which do not register with the MFSC will
not benefit from the tax advantages of registered trusts. A registered
trust must have a Maltese nominee company as one of its trustees,
which files an annual declaration of conformity with the law; no
accounts or tax returns need be filed. (A nominee company is a Maltese
company which has been authorised by the MFSC to provide services
to trusts, and carries the supervisory responsibility on behalf
of the MFSC.)

Both Maltese trusts and foreign trusts registered
in Malta have by definition non-resident settlors and beneficiaries,
and are exempt from income tax, except that they pay an annual fee
to the Government.

Trusts do not have to file tax returns; the nominee
company which is acting as their trustee makes an annual declaration
of conformity with the law. No stamp duty or other taxes are payable
in respect of trust transactions or documents. Trust property may
be imported free of customs duty. A trust is not subject to exchange
control unless a transaction is carried out with a Maltese resident.

Under the 2004 Act, transfers of assets into a trust
or a change of beneficiaries may give rise to a charge to tax.

There are no special provisions in Maltese law covering
Unit Trusts, which are therefore treated in the same way as ordinary
Maltese trusts, and have the same tax regime.

It is likely that a Malta-registered trust will often
be a more effective holding vehicle than the International Holding
Company. On the other hand, when the assets to be held are Maltese
real estate, it may be better to use an unregistered foreign trust.
Trusts are able to use the extensive network of Maltese Double Taxation
Treaties.

DeMontford Bell Expands Malta OperationsWednesday 15/7/2015DeMontford Bell, the UK-headquartered financial introducer, has announced that it is to expand its permanent operations in Malta to support the high volume of business migrating there.

The Malta Financial Services Authority has reported that 2013 has been another successful year for the financial services industry, with strong growth in the number of registered funds and retirement schemes.

Liechtenstein, Malta Sign DTAFriday 4/10/2013Liechtenstein's Foreign Minister Aurelia Frick and her Maltese counterpart
George Vella have recently signed in New York a bilateral double taxation agreement
between the two countries in respect of taxes on income and on wealth.

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